FCA response to House of Lords committee report on enforcement investigations published

The UK Financial Conduct Authority (FCA)'s response to the report issued by the House of Lords Financial Services Regulation Committee (the Committee) on the FCA's proposals to publicise enforcement investigations has been published. The response addresses the Committee's concerns regarding the FCA's proposed changes to its enforcement approach and public disclosure of investigations. The FCA has since published its final policy statement confirming that it would not proceed with introducing a new 'public interest' framework.

In its response, the FCA:

• Highlights progress in enforcement efficiency, noting a significant reduction in the average duration of investigations and a number of enforcement outcomes in 2024, including 37 final notices, five convictions and over £186 million in financial penalties.
• Acknowledges the Committee's concerns about the potential reputational harm to firms from premature publication of enforcement investigations, reaffirming its position, as set out in its final policy statement, to continue with the existing 'exceptional circumstances' test, in determining whether to publicise investigations into regulated firms.
• Acknowledges shortcomings in its pre-consultation engagement and transparency. It admitted that it should have communicated its policy intentions more clearly in the initial consultation and included the proposals in the Regulatory Initiatives Grid. The FCA has committed to conducting a "lessons learned" review, to be published within a year of the new enforcement guide's implementation.
• Acknowledges concerns raised about the absence of a cost benefit analysis (CBA) for the enforcement investigation proposals but maintained that it follows the statutory definition of CBA under the Financial Services and Markets Act 2000.
• Confirms it has engaged extensively with HM Treasury and other government bodies since the first consultation, incorporating their views into its final policy position, as advised by the Committee in its report.

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